Industry experts like to promote the idea that employees are the major force behind a firm’s competitive advantage. Yet the reality is that most financial advisors are still facing a shortage of critical skills. Although investment advisors are making more efforts to attract and retain employees and have become increasingly intuitive about employee needs, the pressure on investment advisory businesses to find and retain talent remains intense. Many financial professionals compound the problem by failing to make talent management a strategic priority for their firm. This is in spite of the fact that one third (33%) of advisors surveyed named staff development and retention as an area that needs improvement.
In 2007, advisors expanded their staff levels–the number of administrative staff increased to three per average RIA firm compared to two in 2006. In 2008, almost 46% of advisors surveyed (mostly small firms with less turnover and smaller staffing needs) said they do not plan to change their firms’ organizational structures and do not feel that they need to recruit new employees. More than half of advisors (52%) surveyed are planning to hire one additional staff member, while only 2% of advisors are planning to reduce the number of employees.
Providing Career Growth Opportunities
Developing solid processes to help employees work efficiently and effectively is one of the biggest challenges advisors face. And 2007 found more advisors providing the training and tools needed to allow employees to have a stimulating career path. The intention? To address the shortage of critical skills, increase retention rates, and improve employee motivation. Advisors boosted their employees’ industry knowledge by sending them to seminars (54%), funding continuing education courses (49%), and providing tuition reimbursement (46%). Only about a fifth (21%) of advisors did nothing to advance employee career growth–compared to 32% in 2006.
Offering Compensation Plans
In order to reward and motivate professional employees, some investment advisors offer incentive packages that include a bonus based on the firm’s gross revenue (24%) or profit margin (22%). Awarding revenue-based bonuses creates a team environment where everyone gets rewarded for their contribution to growth–perhaps the ultimate motivator for many businesses. Half of the advisors surveyed don’t have an incentive plan now, but 17% of those without a plan said they intend to add one within the next year.
Investing in Employees
Direct turnover costs per employee are about 25%-30% of an individual employee’s salary/benefits package, according to market research firm InsightLink Communications–far more than the cost of training a current employee. So it’s worth investing your money and time to train your current staff.